MBL5902
MAY/JUNE 2020
QUESTION 1 – ETHICS
Explain the ethical challenges that are faced by multinational corporations
(MNCs) which operate in the global environment.
Question 1
Labour
Corruption
Different regulations and policies
Environmental issues
Different organisational cultures
Harassment and discrimination
Different political ideologies of different countries
Different economic systems
Infrastructure differences
Conducting business internationally involves more than currency, time and language
differences. Different societies have different expectations regarding how things get
done, what is permissible and what is not. Adding to that variations in political and legal
systems and competitive pressures and the line between ethical and unethical business
practices can be difficult to identify. In this section, we will discuss the ethical issues of
operating in a global environment
1
,Corruption is the first challenge that is faced by these corporations. When a large
corporation decides to enter a foreign market, it must usually secure a number of
licenses, permits, registrations, or other government approvals. Certain types of
business may be even be impossible or illegal unless the corporation is first able to
obtain a change or adjustment to the nation’s laws or regulations. Since the power to
authorize the foreign corporation’s activities is vested in the hands of local politicians
and officials, and since corporations have access to large financial resources, it should
not be surprising that some corporate executives resort to financial incentives to
influence foreign officials. While certain financial incentives, such as promises to invest
in local infrastructure, may be legitimate, any form of direct payment to the foreign
official that is intended to influence that official’s public decisions will cross the line into
bribery.
According to a report issued by the Mexican Employers Association in 2011, companies
operating in Mexico spend more than 10 percent of their revenue on corrupt acts. One
of the most well-known cases was the Walmart scandal that came to light in September
2005 and resulted in the company’s stock value dropping by as much as $4.5 billion.
Evidence unearthed by internal and external investigations revealed a widespread use
of bribes, alleged to total more than $24 million. The bribes were paid to facilitate the
construction of Walmart stores throughout Mexico. The country is a huge market for
Walmart—one in every five Walmart stores is in Mexico. As of October 2014, the
investigation continued, having implicated Walmart senior level management of
complicity or awareness.
The other ethical issue is that of sweatshops. The term sweatshop refers to a factory
that is guilty of some sort of labor abuse or violation, such as unsafe working conditions,
employment of children, mandatory overtime, payment of less than the minimum wage,
unsafe working conditions, abusive discipline, sexual harassment, or violation of labor
laws and regulations. The U.S. Government Accounting Office has chosen to define a
sweatshop as any manufacturing facility that is guilty of two or more of the above types
2
,of labor abuses. However, it is important to understand that the term sweatshop is not
just a legally defined term but a word that is used broadly and has entered the general
lexicon
On April 24, 2013, at Rana Plaza on the outskirts of Dhaka, Bangladesh, a building
containing apparel factories collapsed, trapping and killing more than 1,100 employees.
It was not only the worst industrial disaster in the history of the garment industry, it was
also the world’s most fatal industrial building collapse. News reports soon emerged that
the factory owners had ignored ominous warning signs, such as visible cracks in the
wall, and had illegally added several stories to the top of the building, creating a weight
the building could not bear. Many of the factories operating in the building were
producing apparel for well-known Western brands, such as Walmart, Joe Fresh, and
Mango
The MNC is not above the regulations, laws and jurisdiction of the host and should use
suitable international disagreement resolution mechanisms when necessary. MNCS
should avoid interfering with improper political activities, intergovernmental issues nor
pay bribes to public servants. Getz suggests that control of the host is the basic right
that must be recognized and respected by the MNC.
MNCs should also get licenses, in terms of realistic terms and conditions, for using
properties and rights. In the area of environmental protection, MNCs should collaborate
with the host country in producing and increasing national and international
environmental security standards, as well as notifying the host of any possible
environmental impact of the goods manufactured, services executed, and/or processes
made use of.
The relationship between MNCs and people rotates around consumer guidance, human
rights issues and employment practices. MNCs should value consumer laws of
protection and preserve the safety and health of consumers through accurate
advertising and appropriate labelling.
3
, MNCs should also endorse a non-discriminatory employment policy, provide sufficient
training for local employees, value workers’ rights to organize for collective bargaining,
discuss with workers’ representatives on labour matters, and have an objective of stable
employment. Human rights responsibilities require that MNCs not discriminate on the
basis of religion, gender or race and that these organisations respect the cultural and
social objectives, traditions and values of the countries in which they function
QUESTION 2 - ETHICS Read the case study below and answer the questions
which follow:
Deutsche Bank to pay $258 mn for violating US sanctions AFP/File / Daniel
Roland (Source: The Citizen November 04, 2015)
Deutsche Bank will pay $258 million in fines for doing business with US-
sanctioned countries like Iran and Syria. German banking giant Deutsche Bank
will pay $258 million in fines for doing business with USsanctioned entities and
countries like Iran and Syria, US regulators said Wednesday. (Washington AFP)
“The firm did not have sufficient policies and procedures to ensure that activities
conducted at its offices outside of the United States complied with US sanctions
laws,” said the Federal Reserve, which announced the penalties along with the
New York State Department of Financial Services. Deutsche Bank will pay $200
million to the NYDFS and $58 million to the Federal Reserve. In addition,
Germany’s largest bank will install an independent monitor and fire six
employees who were involved in the sanctions-evasion scheme, and bar three
other employees from any work involving the company’s US operations. From at
least 1999 through 2006, Deutsche Bank disguised 27,200 dollar-clearing
transactions valued at more than $10.86 billion to skirt US sanctions, the
authorities said. The customers involved in the transactions included Iranian,
Libyan, Myanmar, Syrian and Sudanese entities. Deutsche Bank decided to
4
MAY/JUNE 2020
QUESTION 1 – ETHICS
Explain the ethical challenges that are faced by multinational corporations
(MNCs) which operate in the global environment.
Question 1
Labour
Corruption
Different regulations and policies
Environmental issues
Different organisational cultures
Harassment and discrimination
Different political ideologies of different countries
Different economic systems
Infrastructure differences
Conducting business internationally involves more than currency, time and language
differences. Different societies have different expectations regarding how things get
done, what is permissible and what is not. Adding to that variations in political and legal
systems and competitive pressures and the line between ethical and unethical business
practices can be difficult to identify. In this section, we will discuss the ethical issues of
operating in a global environment
1
,Corruption is the first challenge that is faced by these corporations. When a large
corporation decides to enter a foreign market, it must usually secure a number of
licenses, permits, registrations, or other government approvals. Certain types of
business may be even be impossible or illegal unless the corporation is first able to
obtain a change or adjustment to the nation’s laws or regulations. Since the power to
authorize the foreign corporation’s activities is vested in the hands of local politicians
and officials, and since corporations have access to large financial resources, it should
not be surprising that some corporate executives resort to financial incentives to
influence foreign officials. While certain financial incentives, such as promises to invest
in local infrastructure, may be legitimate, any form of direct payment to the foreign
official that is intended to influence that official’s public decisions will cross the line into
bribery.
According to a report issued by the Mexican Employers Association in 2011, companies
operating in Mexico spend more than 10 percent of their revenue on corrupt acts. One
of the most well-known cases was the Walmart scandal that came to light in September
2005 and resulted in the company’s stock value dropping by as much as $4.5 billion.
Evidence unearthed by internal and external investigations revealed a widespread use
of bribes, alleged to total more than $24 million. The bribes were paid to facilitate the
construction of Walmart stores throughout Mexico. The country is a huge market for
Walmart—one in every five Walmart stores is in Mexico. As of October 2014, the
investigation continued, having implicated Walmart senior level management of
complicity or awareness.
The other ethical issue is that of sweatshops. The term sweatshop refers to a factory
that is guilty of some sort of labor abuse or violation, such as unsafe working conditions,
employment of children, mandatory overtime, payment of less than the minimum wage,
unsafe working conditions, abusive discipline, sexual harassment, or violation of labor
laws and regulations. The U.S. Government Accounting Office has chosen to define a
sweatshop as any manufacturing facility that is guilty of two or more of the above types
2
,of labor abuses. However, it is important to understand that the term sweatshop is not
just a legally defined term but a word that is used broadly and has entered the general
lexicon
On April 24, 2013, at Rana Plaza on the outskirts of Dhaka, Bangladesh, a building
containing apparel factories collapsed, trapping and killing more than 1,100 employees.
It was not only the worst industrial disaster in the history of the garment industry, it was
also the world’s most fatal industrial building collapse. News reports soon emerged that
the factory owners had ignored ominous warning signs, such as visible cracks in the
wall, and had illegally added several stories to the top of the building, creating a weight
the building could not bear. Many of the factories operating in the building were
producing apparel for well-known Western brands, such as Walmart, Joe Fresh, and
Mango
The MNC is not above the regulations, laws and jurisdiction of the host and should use
suitable international disagreement resolution mechanisms when necessary. MNCS
should avoid interfering with improper political activities, intergovernmental issues nor
pay bribes to public servants. Getz suggests that control of the host is the basic right
that must be recognized and respected by the MNC.
MNCs should also get licenses, in terms of realistic terms and conditions, for using
properties and rights. In the area of environmental protection, MNCs should collaborate
with the host country in producing and increasing national and international
environmental security standards, as well as notifying the host of any possible
environmental impact of the goods manufactured, services executed, and/or processes
made use of.
The relationship between MNCs and people rotates around consumer guidance, human
rights issues and employment practices. MNCs should value consumer laws of
protection and preserve the safety and health of consumers through accurate
advertising and appropriate labelling.
3
, MNCs should also endorse a non-discriminatory employment policy, provide sufficient
training for local employees, value workers’ rights to organize for collective bargaining,
discuss with workers’ representatives on labour matters, and have an objective of stable
employment. Human rights responsibilities require that MNCs not discriminate on the
basis of religion, gender or race and that these organisations respect the cultural and
social objectives, traditions and values of the countries in which they function
QUESTION 2 - ETHICS Read the case study below and answer the questions
which follow:
Deutsche Bank to pay $258 mn for violating US sanctions AFP/File / Daniel
Roland (Source: The Citizen November 04, 2015)
Deutsche Bank will pay $258 million in fines for doing business with US-
sanctioned countries like Iran and Syria. German banking giant Deutsche Bank
will pay $258 million in fines for doing business with USsanctioned entities and
countries like Iran and Syria, US regulators said Wednesday. (Washington AFP)
“The firm did not have sufficient policies and procedures to ensure that activities
conducted at its offices outside of the United States complied with US sanctions
laws,” said the Federal Reserve, which announced the penalties along with the
New York State Department of Financial Services. Deutsche Bank will pay $200
million to the NYDFS and $58 million to the Federal Reserve. In addition,
Germany’s largest bank will install an independent monitor and fire six
employees who were involved in the sanctions-evasion scheme, and bar three
other employees from any work involving the company’s US operations. From at
least 1999 through 2006, Deutsche Bank disguised 27,200 dollar-clearing
transactions valued at more than $10.86 billion to skirt US sanctions, the
authorities said. The customers involved in the transactions included Iranian,
Libyan, Myanmar, Syrian and Sudanese entities. Deutsche Bank decided to
4
